Arrest of Online Gambling Executive Latest Salvo in War on E-Betting

On July 17, 2006, U.S. prosecutors announced that they had arrested David Carruthers, the CEO of BetOnSports, at Dallas-Fort Worth International Airport. According to published reports, BetOnSports is an online gambling portal which, though based in various nations including UK, Antigua, Costa Rica, Malaysia, The Philippines, Mexico and Guatemala, counts U.S. bettors as a large majority of its customers. The arrest of Mr. Carruthers, who was on a layover between Costa Rica and Britain, is another example of how U.S. legislators, regulators and law enforcement officials are trying to exercise jurisdiction wherever possible to limit online gambling in the U.S., including by arresting and prosecuting executives of offsite Internet gambling sites when they come into the United States. (In an earlier case, Long Island native Jay Cohen, who headed an Antigua-based online bookmaking operation, was in 1998 and convicted in 2000.) Carruthers' arrest comes days after the U.S. House of Representatives approved a bill which would criminalize payment processing in support of Internet gambling, which now goes to the Senate.

Whatever their reasons, opponents of Internet gambling (whether sports-based or casino) face a number of significant hurdles in their efforts to shut it down. First is the international, border-less nature of the Internet. As was the case with both Carruthers and Cohen, while their companies were taking illegal bets from U.S. citizens, they were doing so from outside U.S. borders in countries where the businesses themselves were legal. Absent either physical presence or financial exposure in the U.S., there is little that U.S. law enforcement officials can do to offshore casinos and bookmakers. Another challenge of the Internet is that it is difficult to track or block the actual bettors, given the many different ways people can access the Internet anonymously.

Even with the current bill to criminalize transferring funds in support of online gambling, it is likely that those who wish to bet on the Internet will discover or create new methods of connecting their bank accounts to the casinos in ways the law doesn't address. For example, it is unclear how the proposed bill would address a casino set up in one of the many "virtual worlds" such as SecondLife, where users buy and sell virtual property and character traits with "Linden Dollars", but can convert the online to real-world money through player-to-player transactions on sites like eBay as well as on the game's own Web site. Ultimately, absent an enforced global prohibition on any online gambling-related activity, efforts to prevent Americans from betting on the Internet will probably not pay off.

(Update (July 25th): David Carruthers, the arrested CEO, was fired by BetOnSports.)

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